Amazon.Com Evolving Into Offline Retail Case Solution
Amazon Incorporation started its first B&M books stores in the USA by late 2015, and made huge investments by expanding its business throughout the United States with new projects, i.e. it established Amazon Prime, Amazon Go locations and Amazon Books (Oh, 2018). Not only this, a news regarding the acquisition of Whole Foods (an organic and natural food supermarket) was spread out by Amazon. The case study is based on examining the Amazon’s success rate in expanding into an offline retail business as the company had always been in the e-commerce industry and the case study also emphasizes over the differentiating point in this B&M retail business, which would-lead Amazon to have a competitive advantage in the offline retail industry.
Amazon has been enjoying its domination in the online retail sector, which is continuously growing as shown in the Exhibit 4. Amazon’s Chief Executive Officer has decided to make investments in the offline retail sectors, such as:Amazon Go and the acquisition of Whole Foods. The offline industry seems attractive for Amazon to make investments in. The company has already started its investment in the offline businesses by going against the expectations, such as: Amazon Go, Amazon Fresh and Amazon Books.
The industry seems attractive and provides an opportunity to enter into the market, because 90% of the global population prefer purchasing through offline retail stores. According to (Statt, 2018), the e-commerce is approximately 10% of the total $5 trillion spending over the retail sector. Furthermore, the groceries sector has a market of $800 billion, out of which only 2% is carried through e-commerce channels.
Moreover, despite the changes in the purchasing patterns; a lot of people don’t trust online shopping and they still prefer traditional grocery channels. There are few reasons behind people’s preferences towards local and physical stores, such as:the experience of visiting a local store is more enjoyable and few people don’t prefer the return process of online channels. Amazon has the ability to exploit the offline retail industry, as through beta testing; the company has an access to the shoppers’ data alongside face to face interaction with the customers, while providing services according to their choices, which would provide an edge to the company over the retail business.
Was the diversification into offline retail risky strategic move? What are the pros and cons?
The diversification is an important tool to reduce the risks prevailing in the organization. Amazon has a wide range of consumer base. Consumers are willing to buy online and few consumers also prefer to buy physically. The competitor in the industry,i.e. Walmart was planning to go online in order to compete with the online firms operating in the market.To fulfill the consumers’demand it was important for Amazon to diversify its business’s nature and services so that it could deal with the consumers’ preferences and could also offer a variety of products to the customers. Acquiring the physical store will increase the consumer’s base because the consumers who prefer physical shopping will also prefer to buy at the stores because Amazon’s market impression is positive and consumers prefer to buy from Amazon, which would add value for Amazon. The pros and cons of this diversification is stated below:
- Amazon’s consumer base will increase.
- Amazon’s competitive edge will be sustained and the company would be able to offer both online and offline services to its consumers.
- Diversification is very important for the company to compete with its major rivals because they are also going for diversification.
- To maintain the position in the industry it is important for the company to diversify its services.
- Amazon’s attention will be divided.
- The management will be required at high level.
- It is possible that the physical stores’ image end up impacting t the online image of the company.
- The competition will also increase in the industry………………………
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